Q3 2024 Guardant Health Inc Earnings Call
[inaudible]
Nadia: It's Garden Health, Keep 3 24 earnings call. My name is Nadia and I'll be coordinating the quick today. If you would like to ask a question, please press star, and if I won, not on a
Speaker Change: I will now have a true host, Zarak Khurshid, IcePos and all the best relations to begin Zarak please go ahead.
Zarak Khurshid: Thank you earlier today, Garden Health Release Financial Results for the quarter ended September 30, 2024. Joining me today from Garden to our Helmy Eltoukhy.
Zarak Khurshid: Koseo, AmirAli Talasaz, Koseo, and Mike Bell, Chief Financial Officer. Before we begin, I'd like to remind you that during this call management will make forward-looking statements within the meaning of federal security's laws. These statements involve material risks and uncertainties that could cause actual results.
Or events to materially differ from those anticipated. This call will also include a discussion of non-gap financial measures, which are adjusted to exclude certain specified items.
Additional Information regarding material risks and uncertainties, as well as the non-gaply conciliation to most directly comparable gapped financial measures, are available in the press release, Garton issue today, as well as in our 10K and other filings with the SEC.
Garden of Disclames, any intention or obligation to update or advise financial projections.
and Forward-looking Statement Squad, or because of new information's future events, for otherwise, except as required by law. The information in this conference call is accurate only as of the live broadcast. With that, I would like to turn the call over to Helmy.
Helmy Eltoukhy: Thanks, Eric. Good afternoon and thank you for joining our third quarter 2024 earnings call.
Helmy: Starting on slide 3, 12 years ago we embarked on our mission to conquer cancer with data.
Roughly two years later, we launched into the late stage cancer market with our first version of GARDEN 360 in 2014. In 2021, we launched GARDEN Reveal for cancer occurrence and monitoring.
Helmy: And this past quarter, on August 1st, we were thrilled to launch our first test into the asymptomatic cancer screening market with SHIELD, unlocking an exciting opportunity to potentially impact millions more individuals across the cancer continuum.
As is our practice, I would like to start our call off with a story illustrating the important impact our tests can have on improving patients' lives.
Speaker Change: http://www.facebook.com.com or www.instagram.com
Zarak Khurshid: A woman was initially diagnosed with left breast cancer when she was 50 years old. With a family history of cancer, she opted for an aggressive treatment and underwent a double mastectomy. A few years later, she began experiencing hip and lower back pain.
After a doctor determined the breast cancer had metastasized, a GARDEN360 liquid biopsy test was ordered to determine if the metastasis had any actionable biomarkers.
Zarak Khurshid: An ESR1 mutation was revealed and she was placed on elastostrand for therapy.
Zarak Khurshid: The GARDEN360 test report also noted a BRCA2 variant, which is later confirmed to be a germline mutation, after further testing in a specialized lab.
As a result, her family underwent genetic testing and her sister was found to carry the same BRCA2 germline mutation, but had not experienced a cancer diagnosis to date.
Zarak Khurshid: Her sister chose a prophylactic double mastectomy and oophorectomy as treatment and was found to have a cult of ovarian cancer.
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Speaker Change: This was driven by another quarter of robust precision oncology revenue, which increased 35% in the quarter, supported by significant Garden360 reimbursement tailwinds and broad-based volume growth, fueled by our smart liquid biopsy transition.
Zarak Khurshid: Turning to slide 5. Clinical test volume for the third quarter grew 21% year over year and 7% quarter over quarter, reaching 53,100 tests, driven by strength across the portfolio.
Zarak Khurshid: In particular, Garden360 performed extremely well in Q3 and grew mid-single digits sequentially.
Zarak Khurshid: Furthermore, Revealed continues to see strong growth, even with our ongoing careful management of volumes ahead of broader reimbursement.
Zarak Khurshid: As a reminder, our clinical test volume is specific to our oncology tests, which are Garden 360, Tissue Next, Response, and Reveal, and does not include screening test volumes from SHIELD.
Zarak Khurshid: Q3 was another standout quarter for biopharma with volumes up 40% year over year to a record 10,500 tests.
Zarak Khurshid: I will share some more details on our biopharma progress shortly.
Helmy: Looking more closely at some of the recent highlights within our therapy selection business in slide six.
Helmy: In late July, we launched our upgraded Garden360 LVT and Smart Liquid Biopsy, representing the most significant upgrade to our flagship precision oncology product.
Helmy: Garden360 is the leading liquid biopsy test for patients with advanced cancer with industry-leading turnaround time and the improved platform positions us for continued robust growth and share gain.
Helmy: The Garden 360 upgrade expands the number of genes by nearly tenfold.
Helmy: includes all guideline recommended genomic markers for solid tumors, improves the sensitivity for tumor burden detection by a factor of 10, and introduces the first feature enabled by our methylation tech stack and therapy selection.
Helmy: As the performance and richness of the GARDEN360 LVT product evolves, and we continue to generate clinical data and add features,
Helmy: Oncologists will gain an unparalleled view of cancer that we believe will quickly become a new standard of care in the clinical management of advanced cancer patients.
Helmy: Due to this compelling upgrade, we are very pleased that we are already seeing an increase in both breadth and depth of accounts and believe this will continue to drive growth as additional capabilities are unlocked over time.
Helmy: In particular, Garden360 LVT on smart liquid biopsy was the strongest contributor to year-over-year and sequential volume growth in the third quarter. We also saw continuing improvements in Garden360 ASPs, which reached $3,000 in the third quarter.
Helmy: Last quarter, we shared the upgrade of our Tissue Next test to identify more treatment options for patients with advanced cancer. We have seen strong interest in the expanded panel and are excited to share that effective January 1, 2025, Medicare pricing will increase from $3,100 to $3,500.
Helmy: Following these great updates, I'm excited to share that we again generated positive free cash flow in our therapy selection business in the third quarter.
Helmy: We also announced a partnership with Polyclinico Gemelli in Rome, a leading European oncology center, to implement on-site processing of GARDEN360 CDX tests for therapy selection in advanced cancer patients.
Helmy: This will mark one of the first dedicated liquid biopsy testing facilities housed within a hospital system in Italy.
Helmy: This partnership is significant given there are approximately 400,000 new malignant tumor cases recorded annually across Italy. When implemented, oncologists in Italy will be able to access our tests to make more informed treatment decisions for patients with solid tumor cancers.
Helmy: Finally, results from the Scrum Japan Godzilla study were recently published in Nature Medicine, demonstrating the significant survival benefits of using Garden360 CDX to test patients with advanced gastrointestinal cancer.
Helmy: Of the 4,037 patients in the study, 24% received personalized, targeted treatment based on GARDEN360 CDX, and this subgroup survived nearly twice as long as those who did not receive GARDEN360 MATCH therapy.
Helmy: This study further solidifies the clinical utility of GARDEN360 in guiding effective treatment decisions for advanced cancer patients.
Helmy: Turning to our biopharma business in slide 7.
Helmy: As I mentioned earlier, we had another record quarter of reported biopharma samples growing 40% year-over-year.
Helmy: Biopharma revenue grew 34% year-over-year in the third quarter.
Helmy: We continue to see a lot of excitement for Garden Infinity, our newest biopharma offering powered by our smart liquid biopsy platform, driven by applications such as improved performance, novel biomarker discovery, and signature development.
Helmy: Smart liquid biopsy now represents over 50% of reported samples and new contracts.
Helmy: Importantly, this strength in biopharma is driven by our smart liquid biopsy upgrade, and we are still in the early innings of this exciting upgrade cycle.
Helmy: We have recently seen an acceleration of our clinical garden 360 LBT volume
Helmy: demonstrating how biopharma R&D testing
Helmy: is an important leading indicator for demand of our clinical oncology tests and in turn clinical patient testing is a driver for increasing biopharma interest. Taking together these elements create an important virtuous cycle in the precision oncology space.
Helmy: Finally, we are also seeing increased momentum in China with a strong and growing pipeline of samples.
Helmy: Now shifting gears to Reveal on slide 8, where we are the leader in tissue-free MRD. Last quarter, we shared that data from our COSMOS colon study looking at stage 2 and stage 3 patients was published in the peer-reviewed journal, Clinical Cancer Research.
Helmy: This study was also submitted to MOLDI-X for Medicare reimbursement for the CRC Surveillance MRD Indication and review is ongoing.
Helmy: Beyond CRC surveillance, we have an extensive pipeline of clinical cohorts for establishing validity and utility for garden reveal. This will be instrumental in building compelling evidence that not only supports efforts to expand reimbursement, but also has potential to influence changes in practice guidelines.
Helmy: Looking ahead to the remainder of the year, we anticipate submissions for publications that will support potential Medicare reimbursement for coverage in breast cancer. Next year, we have important clinical validity studies for additional cancers such as lungs, pancreatic, and gastric.
Helmy: Moving on to slide nine. We are excited by the demand we are seeing in the tissue-free MRD market and there are multiple near-term inflection opportunities in 2025. We continue to make good progress towards CRC surveillance reimbursement which will improve our ASB.
Helmy: We also remain on track on our COGS reduction initiatives for reveal. As a reminder, these two milestones will be a significant step towards our long-term goal of achieving greater than 60% gross margins for our MRD business.
Helmy: While we are seeing strong growth and strong market appetite for Reveal, we continue to manage volumes to minimize cash burden and we'll continue to do so until Reveal is gross margin positive, which we anticipate in 2025.
Helmy: Overall, we are seeing tremendous growth and opportunity around Garden360, TissueNext, and Reveal, largely driven by our recent Smart Liquid Biopsy platform transition.
Helmy: As a result of the great progress we have made this year, and are continuing to make, we are more confident than ever that our oncology business will continue to see strong growth over the next few years.
Speaker Change: With that, I will now turn the call over to AmirAli for an update on screening.
AmirAli Talasaz: Thanks, Helmy.
AmirAli Talasaz: Moving on to slide 10.
Helmy: As we have previously announced, we are thrilled that FDA has approved our SHIELD blood test for colorectal cancer screening in adults ages 45 and older who are at average risk for the disease.
Helmy: SHIELD is the first blood test to be approved by FDA as a primary screening option for CRC and also the first blood test for CRC screening that is now covered by Medicare.
Helmy: Turning to slide 11.
Helmy: Just a few days after FTA approval, we brought Shield IVD to market with a successful launch in August.
Helmy: Our initial strategy is to focus on the covered patient population.
Helmy: This approach will help us to establish a strong foundation for industry-leading, long-term scalability and profitability.
Helmy: I'm excited to share that we have had very positive reception and seen strong demand from physicians and patients in the first few months of the test being commercially available.
Helmy: To highlight this positive impact of S.H.I.E.L.D., I'd like to share an example of a primary care provider in rural South Carolina who had previously been facing challenges keeping patients up-to-date with colorectal screening guidelines.
Helmy: With the introduction of ShieldBloodTest, he has seen his screening rates skyrocket.
Helmy: And in just the last few months alone, four of these patients received positive SHIELD tests, quickly went through colonoscopy procedures, and ultimately were diagnosed with early stage colorectal cancer.
Helmy: In all four of these cases, the disease was caught early enough that these patients only required partial colectomy, avoiding any further treatment, and most importantly, were able to quickly resume their lives.
Helmy: Turning now to slide 12 to share some more exciting details on the launch reception.
Helmy: Early post-launch volume was ahead of our expectations, and we exited the quarter with strong momentum, which we continue to see in the fourth quarter.
Helmy: The majority of our volume is coming from covered patients.
Helmy: We saw robust depth of ordering by prescribing physicians.
Helmy: We continue to see an incredibly strong adherence rate of over 90%, which means over 90% of the patients completed the blood draw.
Helmy: And, we are on track to have a trained sales force of over 100 people in the field by end of this year.
Helmy: Moving on to slide 13.
Helmy: We are very pleased to report that Shield received a Medicare price of $920, recognizing Shield as an important new class of first-line CRC screening.
Helmy: This Medicare price makes us more confident that our ASP will be approximately $500 even prior to an Advanced Diagnostics Laboratory Test or ADLT designation.
Helmy: We continue to expect to obtain ADLT designation and secure an even more favorable Medicare price of $14.95 in 2025.
Helmy: Turning to slide 14.
Helmy: CMS has finalized the policy to remove cost-sharing for a follow-on colonoscopy after a blood-based screening test for Medicare beneficiaries.
Helmy: This ruling proactively removes barriers to blood-based CRC screening and acknowledges its unique benefits to promote access to cancer prevention and early detection, particularly for individuals within rural communities and communities of color that are especially impacted by the incidence of CRC.
Helmy: We are encouraged by the quick inclusion of blood in the final 2025 physician fee schedule.
Helmy: This rule will go into effect on January 1, 2025.
Helmy: Moving on to slide 15.
Helmy: We are proud of our team's execution throughout 2024.
Helmy: Starting with publishing our pivotal study results in the New England Journal of Medicine, followed by positive advisory panel voting.
Helmy: Receiving FDA approval with a first-line screening label and finally securing a favorable reimbursement rate and successful commercial launch.
Helmy: We look forward to executing our commercial scale-up and ramping adoption throughout the remainder of this year.
Helmy: We are excited about our upcoming milestones in 2025 and making SHIELD one of the most impactful products in the history of diagnostics.
Helmy: We are optimistic about the potential inclusion of S.H.I.E.L.D. in American Cancer Society or ACS guidelines and expect to secure ADLT status which enables improved ASV.
Helmy: We are pleased with the progress on indication expansion for SHIELD to become a leading multi-cancer detection blood test and expect to present our multi-cancer data.
Helmy: We are also planning to upgrade our CRC screening test with Shield v2.
Speaker Change: With that, I will now turn the call over to Mike for more detail on our financials.
Speaker Change: [inaudible]
Speaker Change: Thanks Amirali. Turning to slide 16, I'll discuss our financial results for the three months ended September 30th 2024 and refer to year-over-year growth rates unless otherwise noted.
Helmy: Total revenue grew 34% to $191.5 million, primarily driven by precision oncology revenue, which increased 35% to $180.6 million.
Helmy: Precision oncology revenue from clinical tests increased 36% to $141.2 million.
Helmy: Clinical test volume grew to a record 53,100 tests in Q3 2024.
Helmy: Clinical volume growth of 21% was in line with our expectations and was primarily driven by Garmin 360.
Speaker Change: As Helmy mentioned, we have seen a very strong uptake of our upgraded Garden360 LDT, which we launched on our Smart Liquid Biopsy platform at the start of Q3, and which led Garden360 to grow sequentially in the mid-single digits.
Helmy: We also saw continued strong growth of revealing tissue during the third quarter of 2024.
Helmy: For the full year 2024, despite the weather impacts we experienced at the end of Q3 and during October, we continue to expect total clinical volume growth to be approximately 20%.
Helmy: Once again, our biopharma business performed incredibly well in the third quarter. With precision oncology revenue from biopharma tests, totaling $39.4 million, increasing 34%.
Helmy: This exceptional growth was fueled by a record number of tests in the third quarter, 10,500, which was up 40%.
Helmy: With good line of sight to the end of the year, we now expect biopharma revenue growth to be in the high 20s for the full year 2024.
Helmy: Finally, development services and other revenue total $10.9 million.
Helmy: As a reminder, Precision Oncology clinical test volume does not include SHIELD tests, and we currently include SHIELD screening revenue in the development services and other lines.
Helmy: We'll start to separately report Shield revenue and volume in the fourth quarter of 2024 as they become material to our numbers.
Helmy: Turning to Garden360 ASPs on slide 17
Helmy: In the third quarter of 2024, we again saw very strong reimbursement and ASP transfer government 360.
Helmy: At our investor day in September 2023, we stated our goal was to reach an ASP of $3,000 for Garden360 by 2028.
Helmy: Since our investigate, we've received an increase to our Garden360 LDT Medicare rate from $3,500 to $5,000 and have seen significant improvements in both the amounts we've been paid for our tests and the speed at which we've been paid by commercial payers.
Helmy: As a result, we're very pleased to report that we achieved our long-term Guardian 360 ASP goal of $3,000 in Q3 2024, roughly four years ahead of target.
Helmy: Achieving this milestone so quickly is a testament to the strategic and operational excellence of our reimbursement team.
Helmy: In addition, the significant improvement in commercial reimbursement has led us to collect more cash than expected for our tests, which in turn has resulted in out-of-period revenue upsides throughout the year.
Helmy: In Q3 2024, cash collected regarding the 360 test performed in prior periods was $12 million above our expectations.
Helmy: It's worth noting that of this $12 million upside, more than half relates to tests performed in the first half of 2024, which illustrates how quickly and consistently we're now being reimbursed for our tests.
Helmy: Going forward, although we don't anticipate similar future out-of-period revenue upsides, we believe our new Gardner 360 ASP of $3,000 is sustainable, and that we have the opportunity to further improve it over the next few years.
Helmy: Moving on to non-GAAP financial measures on slide 18.
Helmy: Our non-gap gross margin excluding cost of screening continues to be very strong, almost 65% in the third quarter of 2024.
Helmy: Non-GAAP operating expenses were $187.3 million, an increase of $10 million compared to the prior quarter.
Helmy: This was primarily driven by a planned increase in sales and marketing expense to support the commercial launch and expansion of SHIELD.
Helmy: The increase was partially offset by savings in R&D expense due to the reduction in Eclipse clinical trial spend, which completed enrollment towards the end of 2023.
Helmy: We continue to tightly control our operating expenses by leveraging the infrastructure we've built to support all of our businesses, by focusing our R&D spend on projects that will drive future growth, and by directing our incremental investments towards the sales and marketing line to accelerate revenue across both screening and oncology.
Helmy: As a result of our increased revenue and operating leverage, both our adjusted EBITDA and free cash flow improved year-over-year in Q3 2024.
Helmy: Adjusted EBITDA loss was $56.2 million in Q3 2024, a decrease of $23.5 million from Q3 2023.
Helmy: Pre-cash flow for the third quarter of 2024 was negative $55.3 million, an improvement of $24.9 million from $80.2 million in Q3 2023.
Helmy: We ended the third quarter of 2024 with approximately $1 billion in cash, which we continue to believe is sufficient to enable us to achieve our goal of reaching cash flow break-even by 2028.
Helmy: We also believe that achieving a Gardner 360 ASP of $3,000, well ahead of our target of 2028, will reduce our total cash burn over the next few years and could help bring forward our cash flow break-even target date.
Helmy: Now, turn to our Outlook and Assumptions for the full year 2024 on slide 19.
Helmy: We are pleased to be able to increase our revenue guidance for the third time this year and now expect full year 2024 revenue to be in the range of $720-$725 million, representing growth of approximately 28-29% compared to 2023.
Helmy: This compares to our initial revenue guidance of 16-19% that we provided in February of this year.
Helmy: The cash collection upside we had in the third quarter.
Helmy: Our higher expectation for full year biopharma revenue and revenue contribution from SHIELD.
Helmy: We continue to expect non-GAP gross margin excluding screening to be in the range of 61 to 63 percent.
Helmy: and Non-Gap Operating Expenses to be in the range of $720 to $730 million, representing a flat to 1% decline year-over-year.
Helmy: An improvement of $70-$80 million compared to 2023 And an improvement compared to our prior expectations of negative $275-$285 million
Helmy: We continue to expect that our therapy selection business will deliver positive free cash flow for the full year 2024 and screening cash burn this year will be approximately $175 million.
Helmy: Please see the complete disclaimer at https://sites.google.com or at https://sites.google.com
Helmy: Finally, while we typically reserve granular out-year commentaries to our Q4 earnings in February, we would like to share some initial considerations as you think about next year.
Helmy: With the positive traction we're seeing from our launch of Garden360 LDT on SmartLiquid Biopsy, we expect an acceleration in Garden360 volume growth in 2025.
Helmy: As a result of this, and continue the expected strong growth across both review and tissue next.
Helmy: We expect oncology clinical volume growth to accelerate above 20% in 2025, even without including contributions from S.H.I.E.L.D., which we will report separately.
Helmy: Finally, turn to slide 20 to review our catalysts.
Helmy: We've made significant progress on milestones across each of our business areas this year.
Helmy: As we look ahead to the rest of 2024, we are very excited by the potential opportunities across therapy selection, MRD and screening.
Helmy: With that, we will now open the call to questions.
Speaker Change: Thank you. If you would like to ask a question please press star followed by one on your telephone keypad. If you would like to remove your question please press star followed by two.
Helmy: We ask you please limit yourself to one question.
Speaker Change: Our first question goes to Bill Bonello of Craig Callum. Bill, please go ahead.
Speaker Change: Hey.
Bill Bonello: Congratulations on a great quarter guys.
Speaker Change: Question on the shield.
Speaker Change: plans, sort of two parts on it. One, you know, with the initial Medicare pricing, even before ADLT, looking pretty strong. I'm curious if that makes you think differently at all about how aggressive you might be sort of early on in terms of your sales and marketing efforts. And then the second part of that.
Speaker Change: is just, you know, conventional wisdom is obviously that you need, you know, USPSTF recommendations to secure commercial reimbursement. I'm just curious if, you know, to what degree you think that's the case universally, or if you've had conversations at all, where people, you know, with payers where you think you might actually be able to secure reimbursement even without that.
Speaker Change: Thanks, Theo, for the question. So I want to reiterate our
Speaker Change: commitment that we made that, you know, we, under all kinds of scenarios, the level of investments that we are going to have for shield in terms of the spend would be around that maximum $200 million for the following years, and this year $175 million as you see that in our reiterated guidance. And even that level of investment is assuming we are going to meet the milestones, the business milestones that we are going to have.
Speaker Change: I am very pleased.
Speaker Change: about 2024 and many milestones that we have achieved, but we are still in the early innings, very, very early innings of commercialization. We need to continue to monitor our volume ramp and meeting revenue milestones that we have to continue that level of investment.
Speaker Change: But obviously I'm very pleased with this
Speaker Change: Medicare pricing that we got, it gives us a lot of opportunity when you think about
Speaker Change: Now our ASB is approximately $500, and effectively even before ADLT, we can get to a reasonable, actually, gross margin for this test.
Speaker Change: very soon as the volume starts to scale as we go to 2025. So we are very, very pleased with where we are sitting. But it doesn't mean that should be positive developments or is going to change our financial discipline of the level of investment in terms of USPSDF.
Speaker Change: Yes, we continue to look at USPSCF as a major milestone for us that would enable a lot of commercial accessibility for the patient on the younger side in a 45 to 64. Having said that,
Speaker Change: This segment of the market, which is now covered today, is very deep. We have a lot of business to mind while we are waiting for guideline inclusion and USPSDS. There is a very, this is a very deep market.
Speaker Change: So it's not that we are going to be just waiting for that guideline, there's a lot of business to mine here, especially now that we have, we are going to have a healthy gross margin in the near future.
Speaker Change: And also keep in mind, there is American Cancer Society guidelines that solve the impact that that guideline inclusion could have on select states based on state level mandates that they have.
Speaker Change: Thank you. The next question goes to Mark Massaro of BTIG. Mark, please go ahead.
Mark Massaro: Hey guys, thanks for the questions, congrats on the quarter.
Mark Massaro: I think some of us were hoping to perhaps hear how S.H.I.E.L.D. was doing in the field.
Mark Massaro: I think most people thought somewhere in the low to mid-thousands of tests.
Mark Massaro: I know, I think I heard you say you plan to report that out next quarter, but maybe Amirali, can you just give us a sense, any metrics like ordering providers or just feedback that you're hearing in the field? I think that would be helpful. And then a question for Mike about the shield target for 500 million plus by 2028 on a million tests. This is at your analyst day, assumed a price of 500 plus.
Mark Massaro: You know, your Medicare price is already set at $920 and may go up to $1500, so just making sure you guys likely see some upside to that initial target that you provided at the analyst day.
AmirAli Talasaz: Yeah, sure, Mark. Thanks for a good question. So we are not breaking out like ship volume at this time, but I can tell you we are very pleased with the progress. You know, the initial volume post-launch is ahead of our expectation. We are now three months into it. We had a
AmirAli Talasaz: Good couple of months last quarter, exited last quarter with good momentum. And that momentum continues to build in this quarter for us. We had a good October. But you know, still, 3Q was not a full quarter for us. It's too early to break it out. But based on the traction that
AmirAli Talasaz: We do fully intend to report the volume and revenue contribution of Shield in our Q4 numbers and Q4 call. So looking forward to sharing more details at the time. The market feedback, as we expected actually,
AmirAli Talasaz: has been very positive to target primary care physicians that we are going after are very enthusiastic about adding this option.
AmirAli Talasaz: to patients and giving them the choice, as I mentioned in the previous remark, like the depth of ordering is very healthy for us for this blood test.
AmirAli Talasaz: which frankly is just an endorsement of how deep this market is more than our commercial execution. I'm proud of what we've done but the reality is this market of unscreened patient population and the people who are
Speaker Change: Thank you for watching.
Mark Massaro: ready for re-screening is a very, very deep market. So we are seeing actually, we are seeing very strong depth of ordering at this time too. I'm looking forward to sharing more details in our Q4 results.
Speaker Change: Yeah, and Mark, on your comments on our investor day target, yeah, we set the target of in 2028 to be to have shield revenue of
Speaker Change: $500 million, with a million tests. And so yeah, implying an ASP of $500. I think, you know, since our investigate, quite a few things have gone positively for us versus the assumptions we had. I mean, firstly, I think the ASP
Speaker Change: I'm getting this Medica rate of 920. Now we already have ASPs around the $500 mark. When we get the ADLT rate, then it's going to depend on the payer mix.
Mark Massaro: But I think we're confident that we can increase that ASP above $500. So that's one thing. I think the other two assumptions that we had...
Mark Massaro: at that investigative was one that we were assuming something more akin to a second line label. And of course, you know, that's gone in our favor now and we have a first line label.
Mark Massaro: And then secondly, we assumed that competition would be on the market about approximately a year after we launched. And I think, you know, now we look at what potential competition is, it's probably at least two and a half years.
Mark Massaro: to be on the market, you know, after our launch back in August.
Mark Massaro: So I think things are going very well for us. We don't we don't want to sit here today and give out some new Long-term guidance, but I think you know that 500 million dollars and 1 million tests. We're feeling very confident about
Speaker Change: Thank you. The next question goes to Sabu Nambi of Guggenheim. Sabu, please go ahead.
Sabu Nambi: Hey guys, thank you for taking my question. Our recent KOL checks indicate that therapy selection time may be larger than what we previously anticipated, even during your IPO, the 700,000 late-stage metastatic solid tumor patients for a test like GARDEN360. And given repeat testing opportunity, could you comment on what you see as the time in maybe the number of tests for GARDEN360 and with respect to repeat ordering for the same patient?
Speaker Change: Yeah, no, thank you for the question. It's something that I think we outlined in great depth at our investor day last year is essentially that
Speaker Change: on what we call zero to one, just getting patients to one test per patient for a lifetime. And you see that now there are first-line, second-line, third-line therapies. There needs to be adaptive management of patients as their therapies stop working and they get cycled to a new therapy.
Speaker Change: And so yeah, we see the market growing by orders of magnitude, we can see a future where
Speaker Change: Patients are getting 3, 4, 5 therapy selection tests over their lifetime, which obviously grows the market considerably. And that's why I think we're very excited about the future that is before us. We're seeing with our biopharma partners.
Sabu Nambi: that they're testing their patients multiple times or testing samples, you know, multiple times for some of these new drugs.
Sabu Nambi: And just like we've seen, you know, we saw record
Sabu Nambi: Biopharma volume over the last few quarters in a space where people were struggling with biopharma.
Sabu Nambi: We are an outlier there, and now that's translating to the clinical side, and I think you're going to see that further translate to further momentum.
Sabu Nambi: and clinical testing. So yeah, we see this as a
Sabu Nambi: really important growth driver that
Sabu Nambi: Frankly, only liquid biopsy can really hit because you can't take tissue biopsies multiple times from patients.
Sabu Nambi: in an easy way. And this is really where, you know, having what we consider to be the, you know, best performing and, you know, I think
Sabu Nambi: Really a sort of most complete liquid biopsy on the market with our new upgraded panel puts us in pole position to capture that market.
Speaker Change: Thank you. The next question goes to Tycho Peterson of Jeffreys. Tycho, please go ahead.
Tycho Peterson: Hey, thanks.
Tycho Peterson: On the back of Cosmos, I'm just wondering if you can help us size, you know, potential upside from reveal surveillance coverage next year. I know you talked at September conferences of...
Sabu Nambi: about 12 or 15 million potential patients being cancer survivors. But what could it do next year? Any more framework you can put around ASP? You obviously have talked about the 2,000 ASP when you're paid by Medicare, but how do we think about ASPs next year? And then did you give a G360 number? I know last quarter was 2,500. Can you give us the number there? Are you reiterating your 20% target for the year?
Sabu Nambi: Amir Ali Talasaz, Helmy Eltoukhy, Unknown Executive, Michael Bell
Sabu Nambi: Target for next year, Tycho. So one, we, yes, we reiterated just on the call and that 20% clinical volume growth, you know, we still expect that for this year. And, you know, we've seen an acceleration in Gartner 360 volume growth, particularly driven by the LDT. And so as we go into 2025, you know, we talked about volume acceleration with Gartner 360, but then also we're seeing, you know, good traction with tissue next.
Sabu Nambi: and Reveal as well. And, you know, driving Reveal acceleration, and we've, you know, we've said this many times, is going to be focused...
Sabu Nambi: are driven by the fact that we get additional reimbursements on the CRC surveillance side and that we bring our cost per test down. So we've revealed from being a negative gross margin to a positive gross margin. So we're making good traction on all of those things. And so, you know, as we go into 2025,
Sabu Nambi: Assuming we get the CRC surveillance reimbursement from Maldi X, I think we'll have an uptick to our ASP. It's a bit difficult to quantify that uptick yet. It's going to depend on the reimbursement rate that we get from Medica.
Sabu Nambi: But yeah, we'll have we'll have an uptick in the in the volume and again with gross margins being positive It's going to allow us to put the foot on the accelerator and push reveal to significantly accelerate next year
Speaker Change: Thank you. The next question goes to Panit Suda of LaRinc Partners. Panit, please go ahead.
Speaker Change: Hi, I'm Amirali Helmy. Thanks for taking my question, and Mike.
Sabu Nambi: You know, it's great to see the Medicare at $920 for SHIELD and it'll be material in fourth quarter. I mean, a bigger question here is that you're ahead of any other liquid biopsy, CRC screening tests in the market.
Sabu Nambi: I think you're going to have V2 data before that. So could you please provide a timing on that V2 data? And also, what is your assumption of market penetration for SHIELD CRC now since having this in the market since August?
Sabu Nambi: Thank you.
Speaker Change: Yeah, thanks Blaine. So in terms of Shield v2,
Sabu Nambi: We continue to expect having that data, you know, if data is positive, potentially upgrade our shield to that between 2025.
Speaker Change: So we are making progress there. In terms of market share today, our blood test, you know, we are just two months into it. So we don't have really any material market share in terms of CRC screening.
Sabu Nambi: Yes, in terms of our kind of long-term projection, what we shared in last fall in the investor day, that assumption that 1 million at a time, we assume we are going to have 60% market share in blood-based CRC screening at a time.
Sabu Nambi: And as Mike mentioned earlier, we assume there would be more progress by some of our competition than what we have observed.
Sabu Nambi: So, but we'll see how the market would shape out. We don't expect to see any other competing tests to get FDA approval and Medicare reimbursement for at least the next two years, not two and a half years.
Sabu Nambi: Thank you very much.
Speaker Change: Thank you. The next question goes to Kyle Mixon of Canaccord. Kyle, please go ahead.
Kyle Mixon: Hey, thanks for taking the questions, congrats on the quarter.
Kyle Mixon: For Mike, the growth implied by the updated guidance is 20-29% over 23. That compares to 16-19% in the initial guide for 24. How much of that 11 percentage point delta in growth has been from these prior period collections and the Medicare pricing updates for G360?
Sabu Nambi: like essentially what's the core revenue growth and quickly for AmirAli. Shields been available as an LBT since May of 2022. How many of those early patients have retaken the test? What are those reordering rates looking like so far? What are your expectations? Thanks.
Speaker Change: From the prior period, we reported $8 million in Q1 and then $8 million in Q2 and then $12 million.
Speaker Change: 28 million in total, but of that 28 million, 8 million of that
Speaker Change: is where it is.
Speaker Change: Within within 2024 so coming from Q1 and Q2 so so effectively from these Out of period upsides. It's roughly around 20 million So, you know the other the other obviously drivers of growth has been on the clinical volume side Primarily that's garden 360 volume growth
Speaker Change: It's been increased to the Garmin 3C.
Speaker Change: Amir Ali Talasaz, Unknown Executive, Michael Bell
Speaker Change: $3,000
Speaker Change: and then of course the incredible performance that we've seen in the biopharma business. So you know growth drivers really across all of the business on top of the you know the additional set of 20 million dollars that we've got from prior year upsides.
Speaker Change: Regarding reordering rate, as you mentioned, we launched the LDT in May of 2022, and our recommended interval is every three years, so we haven't reached to that time window to see what fraction of those patients would get retested. That would be probably something toward like later part of next year that maybe we can have someday.
Speaker Change: Thank you. The next question goes to Tejas Savant of Morgan Stanley. Tejas, please go ahead.
Tejas Savant: Hey guys, good evening. Maybe I'll start with one on G360 and then one on screening.
Speaker Change: Mike, one for you on that growth rate and clinical volume next year exceeding 20%.
Speaker Change: You know, you've got the smart LB upgrade, you've got the ESR1 dynamic now, sort of squarely behind you, you called out a little bit of weather impact as well, weighing down, you know, recent volume, and you've got the surveillance reimbursement for Reveal coming through, which should have volume in the back half of next year, right? So, any sort of finer point you can put on how much
Speaker Change: Amirali Talasaz, Carrie Mendivil, Helmy Eltoukhy, Unknown Executive, Michael Bell, Unknown Executive,
Speaker Change: And have you had any sort of pushback from health systems, et cetera, around quality scores? Just trying to get a sense for what that could mean for the shield volume ramp into 25 as we, you know, try and benchmark it versus the early days of tool-based testing.
Speaker Change: You know what we what we've seen in 2024 with that, you know difficult ESR-1 comms
Speaker Change: with Weather Impact, but you know we're still on track to be approximately 20% growth this year and yeah you know we're very very confident that that clinical volume growth will accelerate in
Speaker Change: And again, you know, I laid out in the prepared remarks. But that's going to be driven by growth across across all the products on the oncology side. So, yeah, GARNIN 360 again, you know, we're seeing.
Speaker Change: Really good traction with the LDT and the smart liquid biopsy upgrade so we know that that volume is going to
Speaker Change: Going to accelerate going into 2025 again tissue next we had an upgraded
Speaker Change: You know, we don't want to be more specific than accelerating above 20%, but I think we sat here very confident across all the products on the oncology side of the business.
Speaker Change: Learning shared work from an experience since August 1, you know, definitely just being in market at the LDT to, you know, those kind of experimentation, you know, getting feedback from market, we really
Speaker Change: Incorporated a lot of those learnings in this successful launch in terms of digital solutions that we have, workflows that we have, connection to blood draw services that we have, even on EMR integration, you know, still it's very very early days, but about
Speaker Change: You know, 15% of our orders even these days are coming from the accounts that we have full EMR integration.
Speaker Change: We are in very early innings of it, but I'm very pleased with this strong foundation that we built to support this strong launch. In terms of quality score, that's very relevant. That's a very relevant parameter as part of our targeting.
Speaker Change: We are kind of not going a lot after the health system accounts or the ones that, you know, have higher sensitivity or quality score.
Speaker Change: On-screen patients come around the table and then a fraction of them go through colonoscopy after getting the blood data.
Speaker Change: But we are kind of not targeting those accounts which have high sensitivity toward quality metrics till we get to the guidelines and either scores gets adjusted. But that's a very material parameter in terms of the adoption of this test over time.
Speaker Change: Thank you. The next question goes to Dan Brennan of TD Cohen. Dan, please go ahead.
Dan Brennan: Great, thank you. Thanks for the questions. Maybe I'll just ask on reveal. Could you provide any color on the contribution in the quarter and kind of what's assumed in 4Q?
Speaker Change: For Cosmos, I think you submitted maybe three or so months ago. Could you give any color on how the process is going, kind of when you expect to hear back? And then I know you put in the slide.
Speaker Change: The press publication, I think, is expected before year-end. Could you just provide some more colour in terms of the indication? And what would that portend for remote exiling? Thanks.
Speaker Change: And then I'll take the second half and then I'll take the first.
Speaker Change: Yeah, in terms of the process around the reimbursement for the therapy surveillance indication, we're making good progress. There's been a couple of back and forth, some clarification of data, but...
Speaker Change: And we're still hopeful that sometime early next year, we should be able to get over the finish line.
Speaker Change: We've made good progress with the breast data.
Speaker Change: We expect to submit that soon for publication.
Speaker Change: And then it'll depend on how fast it sort of comes out and gets accepted by the relevant journal. But yeah, we think next year should be a very important year for us in terms of getting early the two largest indications and
Speaker Change: MRD, Breast, and CRC under our belts. And then obviously that coupled with the major concert reduction initiative we have should put us in good shape.
Speaker Change: Yeah, maybe on the review. We're not breaking out the volumes or the revenue contribution for review. You know, I can tell you that of the sequential growth, the biggest
Speaker Change: driver of that sequential growth and the majority of the sequential growth was from Garland 360 but you know coming to second place that was was revealed so it's still it's still growing very nicely even though we're managing those volumes.
Speaker Change: And so we saw, you know, nice year-over-year growth from Reveal and nice sequential growth. So it's going well. And again, you know, we're really looking forward to 2025 being a pivotal year for Reveal.
Speaker Change: Thank you. The next question goes to Dan Arias of Stifel. Dan, please go ahead.
Dan Arias: Hi guys, thanks for your questions. Mike, on the acceleration that you're talking about for clinical volumes next year, how much are you attributing to international growth?
Speaker Change: Japan and UK. What's the contribution like there? And then to your point on just reveal, I guess, a clarification, maybe, does that acceleration depend on getting surveillance on board as reimbursed by a particular date? Do you have less confidence in it if that process gets dragged out of it into 2025?
Speaker Change: Yeah, yeah, I would say again, the main growth driver
Speaker Change: As we see the acceleration next year, it's still going to be GARN360 in the US. And again, that's what we see in the main traction with GARN360 LDT on Smart Liquid Biopsy.
Speaker Change: You know, international, it's still...
Speaker Change: Relatively low percentage of our overall volume, so I think we still expect to see growth internationally and particularly in Europe and the UK
Speaker Change: But really it's going to be it's going to be dwarfed by what we see in the in the US.
Speaker Change: And for reveal, yeah, you know, I think, again, we've seen good growth.
Speaker Change: We're managing that growth on Reveal. You know, we're making really good progress on reducing the cost per test for Reveal. So we're, you know, we hope that that can be implemented and put in place relatively, in the relatively near future. So even without CRC...
Speaker Change: surveillance reimbursement. I think, you know, we'll be at a place where our cost per test but reveal is
Speaker Change: at the at the low end that we can start to start to push on or reveal and accelerate volumes, even without a CRC surveillance reimbursement. And when that comes, then obviously, you know, we will move to the gross margin positive and we can really push a lot a lot harder. So I think
Speaker Change: Yeah, regardless of the CRT surveillance reimbursement, I think we still expect to see an acceleration with RealBuddy, but that reimbursement's going to allow us to just really push a lot harder.
Speaker Change: Thank you. The next question goes to Yves Bernstein of Bernstein Research. Yves, please go ahead.
Speaker Change: Amir Ali Talasaz, Amir Ali Talasaz, Unknown Executive, Michael Bell
Yves Bernstein: Hi there. Thanks so much for taking the question. Maybe just following up actually on that international question. You said big drivers for G360 will be in the U.S. and then primarily in Europe.
Speaker Change: And in late October, a news source indicated that you actually shut down your Shonan Research Center in Japan before the launch of the full-time program.
Speaker Change: with That's Very Good.
Speaker Change: attributed it to slow uptake of G360 in Japan specifically. So is that a fair characterization of why you shut that down? And can you add more color on the commercial traction that you are seeing in Japan and what your expectations are for G360 there in the short and the medium term?
Speaker Change: Yeah, I mean, the lab closure we had there was really had no relationship to
Speaker Change: sort of any of our progress in Japan. It was just something that we had thought would make sense a number of years ago, especially when we had the sort of South Bank KV. And it's not something that made sense at this point going forward. And so we took the opportunity to really cut
Speaker Change: Some costs
Speaker Change: over there.
Speaker Change: That being said, you know, the ramp has been a little bit slower than we expected in Japan, but that has mostly to do with the way that reimbursement works there and the fact that potentially these therapy selection tests are only reimbursed once per lifetime, regardless if it's tissue or liquid.
Speaker Change: And so tissue has more of a role there in terms of
Speaker Change: Preferences right now, but...
Speaker Change: We're very encouraged by some of the new programs we have there, and we think
Speaker Change: Thank you. The next question goes to Doug Schenkel of Wolf Research. Doug, please go ahead.
Speaker Change: Thank you. Bye. Bye.
Doug Schenkel: Hey, good afternoon guys. A quick one on guidance and then I want to...
Doug Schenkel: Just try to do some shield math and see if you'll bless it on guidance
Speaker Change: You increased full-year guidance, as you know, at the revenue line by almost $20 million. That's at the midpoint. Just wondering if you'd talk through the bridge. Is this essentially just the Q3 beat, or is there more to it than that? Because if it's just the Q3 beat, I'm wondering if...
Speaker Change: You know, that really doesn't capture SHIELD momentum, you know, G360 momentum with the new version and, you know, ASP bump.
Speaker Change: Not to mention, trends on more rapid collections, it just seems like, you know, the error bars might skew to the upside there. So I just want to see if you'll comment on that.
Speaker Change: And then on Shield, I'm going to take a shot at this, development service gross margin was about 22%.
Speaker Change: That's about 40 points below trend. So, you know, that suggests COGS in that category were maybe 4 million higher than you would have expected. Pre-SHIELD
Speaker Change: So if we assume COGS per test of like six to seven hundred bucks, you know, which is higher than your goal, but given the early stage of the ramp seems reasonable, it seems like you probably did five to six thousand tests in the quarter. Any flaw in the logic that you'd point out? Thank you.
Speaker Change: Thank you. Thank you. Thank you.
Speaker Change: Yes, Doug, I think, you know, there's a few factors in us increasing our guidance and so previously it was 690 to 700 and now it's 720 to 725. So,
Speaker Change: we had something like a 27 million step up at the at the midpoint. There are a few things in that one of them, of course, is the cash upside from fancy payments that we saw and that remarks.
Speaker Change: The other is, you know, Gardner 360 ASPs and they've gone up consistently throughout the year and now they're at, you know, now they're at $3,000. So we've got an uplift on the Gardner 360 ASP.
Speaker Change: So they're the real drivers. Of course, on top of that, we start now to have some revenue contribution from SHIELD. So that's also included there. You know, the one thing that stayed consistent over the last few quarters has been our projection of clinical volumes being at 20%. And again, we reiterated that we're expecting to come in at with approximately 20% clinical volume growth. So...
Speaker Change: So that's where we are with that. I think, yeah, on your trying to back into sort of some of the shield volumes, I think
Speaker Change: So when that's a bit a bit off You know one thing that we can talk about or want to talk about is the cost per test And so you know prior to the right to the launch that cost per test was over $1,000
Speaker Change: And a lot of that built into the cost was the fixed cost. And so as we've gone into launch now, as we've started to see traction with the volume,
Speaker Change: Thank you, that's all the questions that we have time for today. This now concludes today's call. Thank you for joining, you may now disconnect your lines.
Speaker Change: Thank you. Thank you. Thank you.
Speaker Change: That's your Lines.